Amy Janzwood and Caitlin Scott explain why food companies have committed to science-based targets to reduce their greenhouse gas emissions and argue that the unique challenges of the agricultural industry compromise the effectiveness of these targets. This opinion piece is from Global Policy Next Generation.

Have you ever wondered how carbon intensive your favourite snacks are? Probably not. But the companies that make them are. Their concern centres on climate change, which will make it harder for these companies to have cheap access to the ingredients and resources they depend on. More than two years after the Paris Agreement most governments continue to backtrack and filibuster as they unroll uninspiring national climate strategies. Meanwhile companies typically viewed as being largely responsible for the glacial pace at which climate policies are adopted are rebranding themselves as the new torchbearers of the energy transition, in part, through self-imposed ‘science-based’ targets (SBTs). So far, over 500 companies have set, or agreed to set, science-based targets. Leading the pack are many of the world’s biggest food and beverage companies including Nestlé, PepsiCo, Unilever, Danone, General Mills, Kellogg’s, and Mars. The food industry has been one of the fastest to commit to SBTs, setting new ambitious targets more than any other sector. However, given the challenges to measuring and managing agricultural emissions, the food and beverage industry is an unlikely candidate for SBTs. We explain why these companies have committed to setting SBTs and ask whether these targets are a solution to food companies’ climate change woes.

Science-based targets: a new approach?

Launched in 2014, the Science Based Target initiative (SBTi) asks companies to set self-imposed targets that state how much and how quickly they need to reduce emissions if they are to contribute to keeping global temperature rise below 2°C compared to pre-industrial levels. The SBTi is a collaboration between CDP (formerly the Carbon Disclosure Project), the United Nations Global Compact, World Resources Institute (WRI) and World Wide Fund for Nature (WWF). These organizations pooled their resources and expertise in order to address two significant challenges: to determine how much companies should reduce their carbon emissions, and how to get them to do it.

The SBTi is one of the more recent initiatives that harnesses the power of market incentives to encourage firms to reduce their carbon emissions. This approach is premised on the idea that once companies recognise the risks associated with climate change, they will take action to address their carbon emissions. This theory of change was pioneered by NGO and industry groups in the early 2000s, and has worked well for increasing transparency and disclosure. However, this approach has been largely unsuccessful in getting companies to reduce their carbon emissions, in part, because the investment community has been slow to recognize and act on the financial risks associated with climate change.

The SBTi is unique because the initiative outlines the business case for setting targets to reduce greenhouse gas emissions. The business case consists of four key assumptions: that setting a SBT will (i) increase regulatory resilience, (ii) boost investor confidence, (iii) drive innovation and (iv) improve profitability and competitiveness. Although there are some promising initial survey results from executives of companies participating in the SBTi, the business case for SBTs remains far from airtight. For example, while companies are more likely to disclose their carbon emissions and set a price on carbon when they are headquartered in a country that has, or is likely to introduce, the appropriate regulation, in most jurisdictions, carbon prices are not high enough yet to incentivize companies to join SBTi (1). While some institutional investors are starting to promote SBTs, their relative impact appears small at this point. Regarding the assumptions about innovation and profitability, the data to test these hypotheses has largely been unavailable. Lastly, companies that have already invested in low carbon innovations are more likely to commit to SBTs (2). However, since we know little about how companies intend to reach their targets, we do not know whether SBTs are developed before or after such investments. So why do companies set SBTs? A look at the food industry provides some clues.

Big food and big targets

Food companies have been actively participating in the SBTi with 50 companies from the sector committed, including those in food retailing, processing and production. Many of the same companies, in the food sector and beyond, that became early adopters of SBTs have been celebrated for their active involvement in CDP -- a not-for-profit organization that manages a global environmental disclosure system -- as climate disclosure leaders because they achieve high scores on disclosing information about their carbon emissions (3). Food companies have several characteristics that make them more likely to strive towards leadership on climate action.

First, the food industry contributes to climate change emissions while being at considerable risk from the impacts of climate change. The agriculture sector makes up approximately 14 percent of global emissions, while the food system as a whole contributes up to 33 percent. The world’s biggest food and beverage manufacturers cite the need to access ingredients in the future as one of the main reasons to take action now. Agricultural supply chains producing those commodities account for the large majority of emissions from the everyday products of these companies. Companies are the first to point this out, and are pursuing a variety of sustainable sourcing initiatives as a result.

Second, companies in this sector have faced NGO pressure on the issue of climate change and SBTs provide one avenue to reduce reputational risk. Oxfam launched a campaign in 2013 targeting the top ten global food and beverage manufacturers. Among other outcomes, the Behind the Brands campaign pushed the food industry to consider Scope 3 emissions (i.e., indirect emissions that come from a company’s value chain), and encouraged the use of science-based targets to do so. As a heavily competitive industry with consumer-facing products, food companies are particularly vulnerable to boycott campaigns. Thus these companies are trying to portray themselves as sustainability leaders so that consumers will respond positively. SBT commitments generate other reputational benefits too. As Amy Braun of Kellogg’s points out, ‘[w]e are one of just a few companies that have set holistic Scope 3 targets for all of our suppliers. This is so powerful and yields a real leadership dividend [...] Having a science-based target helps us build relationships with government and changes the nature of the conversation we have with them.’

SBTs and the food industry: an imperfect match

The SBTi can be credited with creating a common language for the food industry, and for raising the requirements for public emissions reductions targets. Companies can no longer arbitrarily set a target that will be considered legitimate by a company’s stakeholders. Now, authentic science-based targets are ones verified by the SBTi staff. Companies are setting ambitious targets even if they do not yet have a clear idea how to achieve them, which sends an important signal to their sector, and the wider business community (4). Through working with the SBTi, companies are learning what is required to align their business practices with climate mitigation (5). Once a company has buy-in from senior management, SBTs can become part of a company’s long-term business strategy.

However, SBTs have important limitations, particularly when it comes to the food industry. First, there are limits to the sectors and types of activities that the SBTi includes. Notably, the agriculture sector is not included in the SBTi’s manual, which provides guidance on setting SBTs. This means that SBTs for food companies may not fully account for this significant source of emissions. As well, only companies with Scope 3 emissions that make up 40 percent or more of their total emissions are required to set Scope 3 targets. In the food industry, the majority of emissions are the result of agricultural production, which fall under Scope 3 emissions. However, very few food companies disclose these emissions. A recent survey from Ceres -- a nonprofit that works with investors on sustainability issues -- found that only 15 of the top 50 food and beverage companies in the United States and Canada disclosed Scope 3 emissions. Given the challenges of measuring Scope 3 emissions, SBTi suggests these targets ‘generally need not be science-based,’ meaning they do not need to be aligned with the global 2°C target. In short, SBTs do not address the full impact of food companies’ emissions.

Second, while capturing Scope 3 emissions is difficult, managing them is even more challenging. While companies have developed a vast array of programs meant to help farmers reduce their emissions, ultimately, food companies have relatively little control over their agricultural partners, and therefore are limited in their ability to ensure that they meet their Scope 3 targets. There is some evidence that SBTs are encouraging food companies to engage in new ways with farmers and suppliers to reduce their emissions. However, as the SBTi does not currently track companies’ progress towards their targets, implementation is particularly challenging for the food sector.

Third, SBTs largely use a sector-based approach. This means that the amount of emissions reductions are calculated for each company based on the company’s and their sector’s contributions to the global carbon budget. Setting carbon budgets for each sector is important. However, this approach only works for sectors that produce the same kinds of materials (e.g., cement, electricity etc.) and is not very helpful for sectors that produce different kinds of materials (e.g., food products, chemicals etc.). Thus for the food industry, comparing targets is especially difficult -- a case of comparing, quite literally, apples to oranges (or in this case, potato chips to pop). As a result, competitiveness incentives for the food industry are lower than for other industries.

Lastly, and perhaps most importantly, SBTs can only effectively reduce carbon emissions if the large majority of companies in a sector participate and if the targets are ambitious enough. In the food industry, approximately one in five of the 50 largest food and beverage companies in Canada and the United States have set SBTs (6). This is slightly higher than the proportion of Fortune Global 500 companies (17 percent) that have committed to the SBTi. However, all of these companies have the capacity to manage their carbon emissions and set SBTs. Moreover, of the companies that have committed to setting SBTs, only a handful of these targets are compatible with the 1.5°C pathway. Thus much more ambition and participation is needed if the SBTs are to be an effective driver of emissions reductions in the food sector.

Despite the impressive adoption of SBTs by several major global food corporations, these targets are hardly a silver bullet to the industry’s climate woes because they do not fully account for the industry’s greenhouse gas emissions. However, even though the food industry is not the perfect candidate for SBTs, these companies are taking action because they recognize the unique risks associated with climate change in the food industry as well as the reputational gains to be made. In order to increase the effectiveness of science-based targets in this sector, the SBTi must help companies tackle the unique challenges facing the food industry. At the same time, much more corporate participation is needed in this initiative, and quickly, if science-based targets are to catalyze the meaningful climate action the world desperately needs.

Amy Janzwood is a PhD Candidate in Political Science and Environmental Studies at the University of Toronto. She is also a Research Associate at the Munk School’s Environmental Governance Lab where she researches the transformational potential of market-based efforts to decarbonize our energy systems.

Caitlin Scott is a PhD Candidate in the School of Environment, Resources and Sustainability at the University of Waterloo. Her research focuses on the sustainability strategies of Big Food and their implications for achieving the goal of more sustainable diets.

The authors are grateful for insights provided by staff from several of the SBTi’s partner organizations.

Endnotes

This argument was presented in a term paper by Amy Janzwood, Amanda Loder, Olivia Pellegrino, Raul Salas Reyes, and Shannon Hoekstra.

IBID.

Author’s calculation. The authors would like to thank Amanda Loder for helping compile this data.

Interview conducted by Amy Janzwood with a staff member of an SBTi partner organization.

Interview conducted by Amy Janzwood with a staff member of an SBTi partner organization.

Author’s calculation using the list of top 50 food and beverage companies “that sell value-added, consumer-ready goods processed in the U.S. and Canada” in Ceres’ 2018 survey, available here.

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